This article was displayed on the ChosunBiz MoneyMove (MM) website at 5:14 p.m. on Feb. 11, 2026.
Word has spread among wealthy individuals that they can aim for investment gains along with tax-saving benefits, leading to the formation of nearly 1,250 private investment associations last year. It is the highest in five years. As even Financial Supervisory Service Governor Lee Chan-jin is said to be using private investment associations to manage nearly 1.3 billion won, investors are focusing on how to invest.
According to the venture capital (VC) industry and the Angel Investment Support Center, 1,248 private investment associations were newly registered last year. With 1,089 private investment associations newly registered in 2024, the number of new formations, which had stayed at 900 through 2023 (935), surpassed 1,000 for the first time and then increased another 14.6% in just one year.
A private investment association is an association whose main purpose is venture investment by individual investors and distribution of its performance, and the market size has been growing every year. The 1,248 newly formed last year is the highest in the past five years, and as of Feb. 11 this year alone, 79 private investment associations have been newly formed.
The increase in the formation of private investment associations is because the venture investment tax-saving benefit of a 100% income deduction for investments of 30 million won or less is rapidly spreading by word of mouth among individual investors. In addition, investments over 30 million won and up to 50 million won receive a 70% deduction, and amounts exceeding 50 million won receive a 30% deduction from income.
For example, if an office worker in the tax base bracket exceeding 88 million won (38.5% tax rate, including local government tax) contributes 30 million won to a private investment association, the following year only the amount after deducting 30 million won from total revenue is treated as income, and tax is levied on 22.33 million won. The difference of 11.55 million won can be refunded in cash.
It appears that senior public officials have already been enjoying tax benefits through venture investment. Governor Lee Chan-jin, the 16th head of the Financial Supervisory Service (FSS), is a prime example. An analysis of public officials' asset disclosure data shows that Lee holds more than 1.3 billion won through private investment associations (including venture investment associations). Including the spouse, it rises to 1.4 billion won.
At a press briefing on the 9th, Lee said, "I have been investing for seven to eight years to receive income deductions," citing tax benefits as the reason for contributing to private investment associations. Lee added, "The strong income deduction of private investment associations is also an important part of shifting liquidity concentrated in real estate into industrial capital."
Expectations of investment revenue are also cited as a factor driving individuals to invest in unlisted venture companies, such as contributing to private investment associations. Venture companies that private investment associations invest in are mostly startups with corporate value under 50 billion won, and if the corporate value rises, they can achieve a "tenbagger," earning more than 10 times the principal. According to the Ministry of SMEs and Startups, the average rate of return of venture funds liquidated from 2021 to 2023 was around 10%.
Among individual investors considering investments in unlisted venture companies recently, Livsmed is often shared as an investment legend. Livsmed, a medical device company, developed multi-joint laparoscopic surgical instruments with funds raised in the past from private investment associations and grew into a listed company with a market capitalization of 2 trillion won.
Another advantage is the full exemption of capital gains tax on investment revenue. Although it is limited to cases where investment in venture companies certified by the Ministry of SMEs and Startups is maintained for more than three years, investment in unlisted venture companies is called a "zero tax" playing field, with deductions at the entry (income deduction) and again at the exit (revenue sale).
There is growing support for the outlook that registrations of private investment associations will increase further this year. This is because Article 16 of the Act on Restriction on Special Cases Concerning Taxation, the legal basis for venture investment tax benefits, was revised to extend income deduction benefits for three more years until Dec. 31, 2028, on top of the government's intention to revitalize the venture investment market.
An official in the venture investment industry said, "Inquiries about how to contribute to private investment associations increased significantly late last year," adding, "In particular, many investors believe that the corporate value of venture companies will inevitably rebound as the government, which pledged to leap into a venture powerhouse, rolls out support measures based on policy funds."
The rapid sharing of information on investments in unlisted venture companies on platforms is also spurring investment, such as increased registrations of private investment associations. Unlisted investment platforms such as NextUnicorn and Angel League are representative; they not only provide managers' track records to members but also carry out electronic subscription agreements.
Demand is also growing for direct investment in unlisted venture companies. This takes the form of investing in instruments such as convertible bonds (CB) of venture companies on crowdfunding platforms, and the advantage is that investors can choose target companies for direct investment. According to InnoForest's aggregation, Crowdy's monthly unique visitors exceeded 7,400 in November last year.
This year will also see the establishment of relatively safer channels for investing in venture companies that can reduce the burden of losses from defaults and closures, such as the business development company (BDC) system. BDCs are designed to allow individual investors to indirectly invest in venture and innovation companies through the listed market, and they also offer separate taxation on dividend income.
In June, a public participation-type Public Growth Fund (public offering-type Public Growth Fund) will be launched. The Public Growth Fund is a policy fund aimed at building a domestic advanced strategic industry ecosystem with a total size of 150 trillion won, and the government plans to allocate 600 billion won to the public offering-type Public Growth Fund and raise funds from retail investors.
Depending on the investment amount, income deductions of up to 40% are granted, capped at 18 million won. If one employs a "double tax saving" strategy by combining 30 million won in a private investment association (100% deduction) with 30 million won in the Public Growth Fund (40% deduction), refunds of up to about 16.17 million won are expected based on the tax base bracket exceeding 88 million won.
In addition, the government decided to invest up to 20% of the assets of the public participation-type Public Growth Fund as subordinated capital to absorb investor losses first. Even if there are losses from investments in unlisted venture companies, the government will shoulder up to 20%. However, if investors redeem early without completing the three-year investment period, the tax reductions received will be clawed back.
A VC industry official said, "In the past, unlisted investments were the exclusive domain of a handful of asset-rich individuals with information advantages, but now the market is changing so that ordinary individuals can access it," adding, "However, investors should remember that investments in unlisted venture companies have low liquidity and carry the risk of principal loss."